MASTER 
NEGATIVE 

NO.  94-82231 


11 


COPYRIGHT  STATEMENT 


The  copyright  law  of  the  United  States  (Title  17,  United  States  Code) 
governs  the  making  of  photocopies  or  other  reproductions  of  copyrighted 
materials  including  foreign  works  under  certain  conditions.  In  addition, 
the  United  States  extends  protection  to  foreign  works  by  means  of 
various  international  conventions,  bilateral  agreements,  and 
proclamations. 

Under  certain  conditions  specified  in  the  law,  libraries  and  archives  are 
authorized  to  furnish  a  photocopy  or  other  reproduction.  One  of  these 
specified  conditions  is  that  the  photocopy  or  reproduction  is  not  to  be 
"used  for  any  purpose  other  than  private  study,  scholarship,  or  research." 
If  a  user  makes  a  request  for,  or  later  uses,  a  photocopy  or  reproduction 
for  purposes  in  excess  of  "fair  use,"  that  user  may  be  liable  for  copyright 
infringement. 

The  Columbia  University  Libraries  reserve  the  right  to  refuse  to  accept  a 
copying  order  if,  in  its  judgement,  fulfillment  of  the  order  would  involve 
violation  of  the  copyright  law. 


Author: 


Miller,  Adolph  Caspar 


Title: 


The  cost  of  living  problem 


Place: 


[San  Francisco] 


Date: 


[1919] 


COLUMBIA  UNIVERSITY  LIBRARIES 
PRESERVATION 

BIBLIOGRAPHIC  MICROFORM  TARGET 


MASTER   NEGATIVE  « 


ORIGINAL  MATERIAL  AS  FILMED  -     EXISTING  BIBLIOGRAPHIC  RECORD 


Miller,  Adolph  Caspar,  1866- 

Tho  cost  of  living  problem,  an  address  by  A.  C.  Miller, 
member  Federal  reserve  board,  delivered  at  Chicago 
Wednesday,  September  24, 1919,  before  the  American  as- 
sociation of  the  baking  industry.     [San  Francisco!  1919] 


i26i  p.    20"". 


1^  Cost  and  standard  of  living— U.  S.        i.  Title. 


Library  of  Congress 


2(M760 


HD6983.MS 


«■(• 


J 


RESTRICTIONS   ON   USE: 


TECHNICAL  MICROFORM   DATA 


FILM  SIZE:   36w\VY^ 


REDUCTION   RATIO: ^ 


IMAGE  PLACEMENT:   lA 


IB      IIB 


DATE  FILMED: 


fe  -5^^4 


TRACKING  #  : 


MSH     OZ(c/f 


INITIALS: 


\A/.W 


FILMED  BY  PRESERVATION  RESOURCES,  BETHLEHEM,  PA. 


'V? 


'V^ 


^, 


'V? 


^, 


^^,?# 


^ 

^^. 


> 

O 

m 


0) 


e 


^ 


2k 


> 

^t^^"' 
^^^ 


»\ 


> 


'V' 


> 


'Vl' 


a? 


e: 


%o- 


^^ 


*> 


^ 


^v^ 


^v 


1.0  mm 


1.5  mm 


o 

3 
3 


o 
o 

3 
3 


^ 


O 


|rPE|l|;E|5|-| 


I 


^        CO     lllll  #% 

O     U  >v  • 


bo 


O^ 


00 


ro 
o 


2.0  mm 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 
abcdefghijklmnopqrstuvwxyz  1234567890 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 
abcdefghijklmnopqrstuvwxyzl234567890 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 

abcdefghijklmnopqrstuvwxyz 

1234567890 


2.5  mm 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 

abcdefghijklmnopqrstuvwxyz 

1234567890 


rX- 


^.<^ 


>S' 


>S 


% 


V 


"Io 


a 


f^ 


fcP 


^o 


fp 


^ 


^ 


« 


^^ 


.^1 


iX> 


<^ 


■^ 


=1 

O 

o 

"D  CO  "O 


o 


o 
o 

> 


m  ■ 


o 


CO 

Ooo 

m 


> 

3D 
O 


SCHOOL  OF  BUSINESS 
COLUMBIA  UNIVERSITY 


Number  1  02 
October  1,  1919 


/^" 


ii 


<f 


The  Cost  of  Living 

Problem 


.-Mttht  >»>>,  -',^ 


"^niTTfj 


LIBRARY 


School  of  Business 


J 


s 


The  Cost  of  Living  Problem 


An  Address  6y 
_Ai_C*.-MiUcr,  Member,  Federal  Reserve  Board 

Delivered  at  Chicago 

Wednesday,  September  24,  1919 

before  the 

American  Association  of 

the  Baking  Industry 


SCHOOL  OF  BUSINESS 
COLUMBIA  UNIVERSITY 


mti 


The  Cost  of  Living  Problem 


ft 

I  SI 


That  there  is  a  feeling  of  unrest  abroad  in 
the  country  is  too  obvious  to  admit  of  question- 
ing.   That  this  unrest  is  delaying  the  recovery 
and  readjustment  of  industry  and  in  general 
'  the  restoration  of  normal  conditions  seems  al- 
most   equally    obvious.      That   this    unrest   is 
social  as  well  as  industrial  is  becoming  clearer 
every   day.     That  the   unrest   in  the   United 
States  is  a  part  of  the  general  world  unrest 
following  the  great  war  has  latterly  become 
evident.     That  the  situation  is  a  serious  one 
cannot  be  denied,  but  just  because  it  is  serious 
it  is  well  not  to  make  it  more  serious  by  taking 
it  too  seriously.    Alarm  and  apprehension  do 
not  create  the  best  atmosphere  in  which  to  take 
wise  counsel  and  make  wise  decisions.    On  the 
other  hand,  the  situation  is  not  one  to  be  taken 
light-heartedly  as  some  are  showing  a  disposi- 
tion to  do.    It  will  not  do  to  dismiss  the  exist- 
ing unrest  with  the  remark  that  it  is  '^naturaP' 
after  such  a  war  as  the  world  has  gone  through 
these  past  five  years  and  that  conditions  are 
worse  in  other  countries  than  our  own.     It  is 
no  ordinary  condition  of  unrest  with  which  we 
are  confronted.    Industrial  discontent  forms  a 
large  part  of  it,  but  it  is  more  than  an  indus- 
trial question  that  is  presented.     Doubts,  dis- 
trust and  antagonism  have  taken  hold  of  the 
mind  and  soul  of  large  sections  of  the  popula- 
tions of  all  the  leading  countries  of  the  world, 
our  own  included,  with  respect  to  existing  in- 
stitutions and  other  social  classes.    The  preva- 
lent unrest  presents,  therefore,  a  condition  of 


mind  to  be  dealt  with.  To  handle  it  success- 
fully means  that  its  causes  must  be  carefully 
understood.  Sympathy,  as  well  as  intelligence, 
must,  therefore,  be  applied  to  their  examina- 
tion, if  a  quick  way  out  of  the  impending  situa- 
tion is  to  be  found  and  our  country  saved  the 
pain  and  turmoil,  sacrifice,  waste,  ruin  and 
class  bitterness,  which  an  unintelligent  and 
unsympathetic  handling  of  the  situation  would 
involve. 

CAUSES  OF  INDUSTRIAL  UNREST 

Among  the  causes  of  industrial  unrest  in  the 
United  States  at  the  present  time  there  are 
two  which  seem  especially  worthy  of  public 
attention,   particularly   among   the   employing 

classes : 

1.  The  declining  value  of  the  dollar  with  the 
high  and  advancing  cost  of  living;  and, 

2.  The  absence  of  a  national  and  construc- 
tive policy  with  respect  to  labor. 

Indeed,  these  two  are  largely  intertwined. 
Cost  of  living  has  developed  into  much  more 
than  a  cost  of  living  problem,  because  until 
quite  recently  no  definite  and  competent  pro- 
gram for  dealing  with  it  has  been  undertaken. 
The  fact  that  the  Government  and  the  nation 
have  drifted  without  admitting  that  there  was 
an  industrial  situation  which  ought  to  be 
studied  and  remedied  as  quickly  as  conditions 
would  permit,  not  unnaturally  established  in 
the  minds  of  the  working  classes,  many  of 
whom  were  suffering  real  hardships  because 
of  high  and  advancing  prices,  a  feeling  that 
now  that  the  war  was  won  and  over,  their  con- 


dition and  needs  had  ceased  to  be  a  matter  of 
national  concern.  As  a  result  the  war  has  left 
us  not  only  with  a  cost  of  living  problem,  but 
also  with  the  problem  of  restoring  the  faith 
of  the  average  working  man  in  the  disposition 
of  the  country  at  large  to  concern  itself  with 
his  welfare. 

It  is  time,  therefore,  that  earnest  thought 
should  be  given  to  the  present  industrial  un- 
rest. Something  must  be  done  to  help  labor 
meet  the  cost  of  living  problem,  but  beyond 
that  something  substantial  must  be  done  to 
put  labor  in  a  better  frame  of  mind  on  the 
larger  question  of  its  future  economic  position. 
We  need  a  constructive  policy  in  labor  mat- 
ters. Labor  should  be  given  an  objective — an 
attractive  objective — toward  which  to  work  in 
order  that  hope  and  contentment,  as  well  as 
wages,  may  be  its  portion  in  American  indus- 
try. 

HIGH  COST  OF  LIVING 

So  far  as  the  unrest  in  the  United  States  is 
economic  in  character,  the  high  and  rising  cost 
of  living  may  be  said  to  be  the  chief  source  of 
irritation.  During  the  war  the  acute  situation 
produced  by  rising  prices  was  endured  on  the 

whole  with  fortitude  and  patience,  because,  it 
was  said,  ^^We  are  at  war,''  and  in  the  confi- 
dent expectation  that  the  war  would  be  brief 
and  that  the  close  of  hostilities  would  bring  a 
lower  level  of  prices  and  a  great  and  pro- 
gressive improvement  in  the  cost  of  living  situ- 
ation. As  a  matter  of  fact,  barring  the  first 
months  following  the  armistice,  the  price  situ- 


A 


ation  as  it  affects  the  cost  of  living  (that  is  to 
say,  the  prices  of  articles  of  general  consump- 
tion, such  as  food,  clothing,  fuel,  light  and 
housing)  has  grown  worse  instead  of  better. 

Why  is  this?  What  is  it  that  is  keeping, 
prices  up?  These  questions  must  be  answered 
before  the  real  nature  of  the  cost  of  living 
problem  can  be  understood  and  a  solution 
undertaken. 

In  general  the  answer  is  that  the  continu- 
ance of  many  of  the  influences  that  raised 
prices  during  the  war  is  responsible  for  the 
continuance  of  high  prices  after  the  war,  with 
a  new  aggravation  added  in  the  shape  of 
profiteering. 

PEOFITEERING 

The  extent  to  which  profiteering,  that  is  to 
say  hoarding  and  speculative  holding  of  goods 
for  a  rise  of  prices,  is  responsible  for  recent 
price  advances  in  the  United  States  is  not,  of 
course,  a  matter  that  can  be  statistically  deter- 
mined. It  is,  however,  a  matter  of  widespread 
belief,  supported  in  part  by  ofl&cial  investiga- 
tion of  the  practices  pursued  by  certain  indus- 
tries since  the  armistice,  that  prices  of  many 
articles  of  ordinary  consumption  are  appreci- 
ably higher  than  economic  conditions  warrant. 
The  recent  declines  of  retail  prices  in  several 
lines  confirm  this  impression.  Some  mitiga- 
tion of  the  cost  of  living  situation  may  be 
expected  from  the  elimination  of  control  of 
profiteering  practices,  but  it  seems  not  improb- 
able that  when  all  is  accomplished  that  can  be 
accomplished   through   investigation,  publicity 


and  prosecution,  to  effect  a  reduction  of  prices, 
the  country  will  still  be  left  with  a  price  situ- 
ation which  will  be  far  from  satisfactory  and 
which  will  indicate  that  the  causes  of  the  high 
cost  of  living  which  have  got  to  be  reached  in 
order  to  solve  the  cost  of  living  problem  lie 
deeper. 

Indeed  the  increase  in  profiteering  itself  is  a 
thing  which  needs  explanation.  After  all,  why 
is  there  so  much  more  profiteering  than  ordi- 
narily? Profiteering  is  an  old  instinct  of  hu- 
man nature.  Cupidity  or  the  desire  to  make 
all  the  profit  that  can  be  made  out  of  a  situa- 
tion by  pushing  prices  to  the  limit  of  endur- 
ance is  no  new  trait  of  man.  Human  nature 
has  not  been  changed  in  this  particular  by  the 
war.  The  war  has  simply  afforded  an  oppor- 
tunity for  a  more  active  and  aggressive  asser- 
tion and  play  of  certain  human  traits. 

The  seller  has  always  sought  to  get  for  his 
goods  all  the  money  that  he  could.  The  buyer 
has  always  sought  to  get  for  his  money  all  the 
goods  that  he  could.  As  a  rule,  buyer  and 
seller  are  matched  in  intelligence,  acumen  and 
intensity  of  desire.  From  their  action  there 
have  usually  resulted  prices  that  could  prop- 
erly be  regarded  as  the  outcome  of  market 
competition.  Sometimes,  however,  conditions 
are  such  that  a  buyer  is  in  the  position  of  van- 
tage; for  example,  when  the  outlook  indicated 
that  prices  would  fall.  There  are  other  times 
when  the  conditions  are  such  that  the  seller  is 
in  a  position  of  vantage;  for  example,  when 
the  outlook  was  for  a  rise  of  prices.  It  is  ris- 
ing prices  which  induce  hoarding,  speculation 


t 


I 


and  profiteering.  Ordinarily  buying  for  a  rise 
in  such  circumstances  undoubtedly  tends  to 
accelerate  or  aggravate  the  rise  of  prices.  But 
it  is  always  a  question  whether  speculation 
and  profiteering  are  more  the  cause  of  high 
prices  than  they  are  the  effect  of  high  prices. 

When  all  is  said  and  the  greater  economic 
truth  is  stated,  the  fact  is  that  prices  make 
themselves  far  more  than  they  are  made. 
Profiteering  has  flourished  in  the  United  States 
and  elsewhere  in  recent  years  because  the  price 
situation  has  been  favorable  to  it.  The  profi- 
teer is  a  creature  of  conditions.  He  does  not 
make  conditions,  though  he  frequently  does 
much  to  make  them  worse.  Like  the  poor,  the 
profiteer  is  always  with  us  ever  ready  to  go 
when  the  going  is  good.  To  say  that  prices  are 
high  because  of  profiteering  explains  little,  and 
does  not  get  us  far  on  the  way  toward  a  solu- 
tion of  the  cost  of  living. 

Our  high  prices  are  far  more  an  economic 
fact  than  a  criminal  fact.  Their  correction  will 
therefore  be  found  more  through  the  processes 
of  industry  than  through  the  processes  of  the 
courts.  Prosecution  of  profiteers  will  do  some- 
thing; it  is  to  be  hoped  will  do  much  to  im- 
prove the  situation,  but  prosecution  of  industry 
will  do  more.  Prosecution  of  profiteers  may 
lower  prices  but  it  will  not  produce  goods. 
What  is  most  wanted  at  the  present  juncture 
is  not  alone  lower  prices,  but  more  goods  at 
lower  prices.  So  far  as  the  price  problem  has 
given  rise  to  a  cost  of  living  problem,  it  is 
mainly  a  problem  in  production.  The  causes 
of  the  existing  situation  are  mainly  economic 


and  the  remedies   must  therefore  be  mainly 
economic. 

WAGES  AND  PEICES 

Much  the  same  may  be  said  of  wages  as  a 
cause  of  the  high  cost  of  living.  There  is  a 
good  deal  of  misapprehension,  particularly 
among  employers  of  labor,  of  the  relation  be- 
tween wages  and  prices.  Looked  at  from  the 
point  of  view  of  the  individual  employer  of 
labor,  wages  is  an  element  of  expenses  of  pro- 
duction which  regulate  the  price  which  must 
•  be  received  for  the  product  if  the  business 
enterprise  is  to  succeed.  It  is  not  surprising, 
therefore,  that  the  employer,  who  ordinarily 
reasons  from  wages  to  prices,  should  conclude, 
when  both  prices  and  wages  are  rising,  that 
prices  are  rising  because  wages  are  rising. 
There  is,  however,  little  foundation  for  this 
view  of  the  connection  between  high  wages  and 
high  prices,  looking  at  the  matter  as  an  eco- 
nomic condition  rather  than  a  business  con- 
dition. 

When  are  wages  high?  The  employer  does 
not  employ  workmen  and  pay  wages  for  the 
fun  of  it.  He  employs  men  and  raises  their 
wages  only  as  it  pays  him  to  do  so.  It  pays 
him  to  do  so  when  prices  are  rising  and  profits 
are  following  in  the  wake.  High  wages  are 
rather,  therefore,  the  resultant  of  rising  prices 
than  the  cause,  and  there  is  far  less  of  a 
vicious  circle  in  the  relation  of  wages  and 
prices  than  is  currently  alleged.  As  a  general 
proposition,  the  economic  sequence  which  re- 
sults in  high  wages  may  be  stated  briefly  as 


li 

I 

I 


follows:  Brisk  trade,  intensive  demand  for 
goods,  rising  prices,  increasing  profits  result- 
ing in  increased  demand  for  labor  and  rise  of 
wages.  This  sequence,  I  think,  represents  the 
approximate  relationship  betvreen  the  move- 
ment of  prices  and  the  movement  of  wages  in 
the  United  States  during  the  years  1914  to 
1919. 

Both  prices  and  wages  (which  are  the  price 
of  labor)  have  risen  from  the  same  general 
causes.  They  do  not  explain  one  another. 
They  are  not  themselves,  either  one  or  the 
other,  a  primary  cause  but  the  effects  and  the 
expression  of  fundamental  forces  governing — 

1.  The  money  and  credit  demand  for  goods, 
and 

2.  The  supply  of  goods. 

WHAT  HIGH  PEICES  AEE  DUB  TO 

The  more  the  matter  is  studied  the  clearer 
it  is  that  the  high  prices  which  developed  with 
the  European  war  in  1914,  and  which  are  still 
with  us  as  a  heritage  of  the  war,  are  simply 
to  be  regarded  as  an  extreme  case  of  the  work- 
ing of  the  time-old  economic  law  of  demand 
and  supply.  In  the  United  States,  as  the  world 
over,  through  the  past  five  years,  intensified 
demand  (credit  as  well  as  economic  demand) 
for  goods  and  an  inadequate  supply  of  goods 
have  put  up  and  kept  up  prices  and  given  us 
the  acute  cost  of  living  situation  so  widely 
complained  of. 

Turning  then  to  the  major  influences  in  the 
price  changes  which  have  taken  place  in  the 


i 


five  years,  there  are  three  that  stand  out  con- 
spicuously.   They  are: 

1.  The  excessive  demand  by  belligerent  gov- 
ernments for  war  supplies  both  before  and 
after  our  entry  into  the  war. 

2.  The  excessive  expansion  of  banking  credit. 

3.  Shortage  of  supplies  in  many  lines,  due  to 

(a)  Wasteful    consumption    and   loss    of 
goods ; 

(b)  Heavy  loans  of  capital  and  exporta- 
tions  of  goods,  and 

(c)  Slackening  of  production. 

Taking  the  five-year  period,  1914  to  1919,  as 
a  whole,  the  most  persistent  single  influence 
affecting  prices  has  been  the  expanding  state 
of  credit. 

Taking  the  period  before  our  entry  into  the 
war,  the  enormous  demand  of  Europe  for 
American  war  supplies,  aided  by  easy  credit 
conditions  in  the  United  States,  was  the  most 
important  influence  affecting  prices. 

Taking  the  period  since  our  entry  into  the 
war,  a  factor  of  equal  importance  with  those 
already  enumerated  was  the  inability  of  our 
industry  immediately  to  reorganize  itself  to 
meet  the  vast  requirements  of  the  Government 
for  war  supplies  of  one  kind  or  another  for  the 
use  of  its  armed  forces.  Coupled  with  this  and 
aggravating  the  situation  was  the  heavy  drain 
of  goods  from  the  United  States  for  the  use  of 
the  armies  and  the  civilian  populations  of  the 
nations  with  which  we  were  associated  for 
which  no  goods,  at  any  rate  in  anything  like  an 
equivalent  amount,  were  received  in  return. 

Taking  the  most  recent  period,  the  fiscal  year 


f^« 


p: 


1919,  which  includes  eight  months  following  the 
armistice,  the  active  and  immediate  causes  of 
rising  prices  are  the  greatly  increased  shipment 
and  sale  of  merchandise  on  credit  to  Europe, 
particularly  foodstuffs  and  manufactures  ready 
for  consumption,  slackening  of  production,  di- 
minished economy  of  consumption  and,  as 
already  noted,  profiteering  and  the  speculative 
holding  of  goods  for  a  rise. 

CREDIT  EXPANSION 

The  form  that  credit  demand  (and  expan- 
sion) has  taken  in  the  United  States  has  been 
banking  credit  in  the  shape  of  bank  deposits. 
Expansion  of  the  currency  has  played  a  very 
subordinate  role.  It  is  no  exaggeration  to  say 
that  expansion  of  the  currency  has  been  a  con- 
sequence rather  than  a  cause  of  our  high  prices. 
Wholesale  prices  began  to  rise  sharply  in  the 
United  States  with  heavy  demands  for  our 
goods  from  Europe  shortly  after  the  begin- 
ning of  the  war  in  1914.  Credit  was  expanded 
to  meet  the  requirements  of  export  industries. 
Prices  at  wholesale  rose  and  kept  on  rising. 
Eetail  prices  had  to  follow  suit,  and  thus  there 
was  called  into  existence  an  increased  amount 
of  pocket  money  to  accommodate  the  needs  of 
the  community. 

So  far  as  expansion  of  the  purchasing  me- 
dium of  the  country  is  responsible  for  our 
great  rise  of  prices,  it  has  been  and  is  purchas- 
ing medium  in  the  form  of  bank  deposit  credit 
and  not  in  the  form  of  the  Federal  Eeserve 
Note. 

Commercial  bank  deposit  credits  in  the 


United  States  have  increased  from  $16,264,- 
000,000  to  $30,099,000,000,  an  increase  of  about 
85  per  cent,  between  the  dates  of  June  30,  1914, 
and  June  30,  1919.  Loans,  discounts  and  in- 
vestments of  the  same  institutions  have  in- 
creased in  the  same  period  from  $15,819,000,000 
to  $29,765,000,000,  or  about  88  per  cent.  A 
large  part  of  the  increase  in  the  loan  and  in- 
vestment account  is  made  up  of  war  securities 
and  war  loan  paper.  This  is  estimated  to 
amount  to  as  much  as  from  six  to  seven  billions 
of  dollars. 

Treasury  needs  have  been  the  chief  factor  in 
our  credit  expansion.  The  situation  of  the 
United  States  obliged  the  Government  to  bor- 
row money  faster  than  the  rate  of  saving  of 
the  community  could  sustain.  The  result  was 
reliance  on  banking  credit  to  make  up  the  de- 
ficiency; and  thus  the  resulting  rise  of  prices 
may  be  described  in  its  economic  effects  as  a 
method  of  forcing  economy  and  saving  on  the 
community,  or  large  sections  of  the  community, 
because  most  people  buy  less  and  consume  less 
as  prices  rise. 

As  the  present  volume  of  undigested  Liberty 
Bonds  is  absorbed  out  of  savings,  the  invest- 
ment account  of  the  banks,  which  is  now 
swollen  because  of  the  large  amount  of  war 
securities  they  are  carrying,  will  diminish  and 
with  the  diminution  will  go  a  decline  in  the 
volume  of  bank  deposits,  following  which  will 
come  a  decline  in  the  volume  of  currency  in 
circulation.  Prices  will  then  fall  and  the  cost 
of  living  decline. 

Working  to  the  same  effect  in  bringing  about 


V 


a  lowering  of  prices  will  be  the  expected  dimi- 
nution in  the  rate  at  which  the  United  States 
has  been  exporting  goods  to  Europe  on  credit. 
The  large  volume  of  exports  we  have  been 
sending  out  of  the  country  in  excess  of  what 
we  have  received  as  imports  has  been  one  of 
the  great  determining  factors  in  our  rising  cost 
of  living  through  the  last  five  years  and  espe- 
cially in  the  last  year. 

HEAVY  EXPORTS  TO  EUROPE 

A  comparison  of  our  export  trade  for  the 
five  years  since  the  beginning  of  the  European 
war,  and  particularly  the  period  following  our 
entrance  into  the  war,  with  conditions  in  the 
five  years  preceding  the  breaking  out  of  the 
European  war  yields  some  very  instructive  re- 
sults. 

Our  exports  of  domestic  merchandise  for  the 
years  1910  to  1914,  inclusive,  amounted  to 
$10,652,143,234,  or  an  annual  average  of  $2,- 
130,428,647.  For  the  five  years,  1915  to  1919, 
inclusive,  our  domestic  exports  amounted  to 
$26,128,183,680  (an  annual  average  of  $5,225,- 
636,736),  of  which  $19,139,827,636  represents 
export  of  domestic  merchandise  for  the  years 
1917,  1918  and  1919,  and  $7,074,011,529  domes- 
tic exports  for  the  last  fiscal  year  1919.  Our 
average  annual  exports  for  the  five  years  from 
the  beginning  of  the  war  exceeded  our  average 
in  the  earlier  period,  1910  to  1914,  by  $3,095,- 
208,089,  or  145.3  per  cent.  For  the  three-year 
period  since  we  entered  the  war,  the  amount  by 
which  exports  exceed  those  which  were  normal 
before  the  war,  is  $4,249,513,898,  or  199.5  per 


cent.  For  the  last  fiscal  year  1919,  the  excess 
is  $4,943,582,882,  or  236.2  per  cent.      . 

These  comparisons  are  made  on  basis  of  our 
customs  house  reports  and  do  not  include  ex- 
ports made  by  the  Government  itself,  which 
constituted  a  very  important  addition  to  our 
exports  in  the  period  since  we  entered  the  war. 
Government  exports  have  been  estimated  as 
high  as  from  30  to  35  per  cent  of  the  exports 
regularly  reported  by  the  customs  house.  Some 
indication  of  their  volume  is  given  by  the  re- 
turns of  the  aggregate  weight  of  army  ship- 
ments for  the  period  June,  1917,  to  October, 
1918,  of  4,897,600  short  tons,  and  of  navy  ship- 
ments for  the  period  May,  1917,  to  December, 
1918,  inclusive,  of  1,090,724  net  tons. 

Of  equal  significance  with  the  increase  of 
the  totals  of  our  export  trade  in  the  last  five 
years  are  figures  indicating  changes  in  its  com- 
position. Grouping  our  exports  into  six  great 
groups,  we  have: 

1.  Crude  materials  for  use  in  manufacturing. 

2.  Foodstuffs  in   crude  condition  and  food 
animals. 

3.  Foodstuffs  partly  or  wholly  prepared. 

4.  Manufactures  for  further  use  in  manufac- 
turing. 

5.  Manufactures  ready  for  consumption. 

6.  Miscellaneous. 

We  find  that  while  the  first  named  group, 
crude  materials  for  use  in  manufacturing,  con- 
stituted an  average  of  33.1  per  cent  of  our  an- 
nual exports  in  the  five-year  period,  1910  to 
1914,  it  fell  to  14.89  per  cent  in  the  five-year 
period,  1915  to  1919.    The  second  group,  food- 


stuffs  in  crude  condition  and  food  animals,  rose 
for  the  same  period  from  5.94  per  cent  to  9.62 
per  cent.  The  third  group,  foodstuffs  partly 
or  wholly  prepared,  rose  from  13.84  per  cent 
to  18.11  per  cent.  The  fourth  group,  manufac- 
tures for  further  use  in  manufacturing,  held  its 
own,  being  16.04  per  cent  in  the  earlier  period, 
and  16.69  per  cent  in  the  latter  period.  The 
fifth  group,  manufactures  ready  for  consump- 
tion, rose  from  30.71  per  cent  in  the  earlier 
period  to  an  average  of  39.49  per  cent  in  the 
latter.  The  sixth  group,  miscellaneous,  rose 
from  .37  per  cent  in  the  earlier  period  to  1.20 
per  cent  for  the  latter. 

It  must  be  admitted  that  the  comparisons 
just  made  for  the  purpose  of  showing  the  in- 
crease in  the  export  trade  of  the  country  give 
an  exaggerated  and  distorted  view  of  the  ex- 
port trade  as  it  bears  upon  the  cost  of  living 
situation  because  the  volume  of  our  exports  is 
stated  in  value,  not  in  quantities.    The  great 
rise  of  prices  has  reflected  itself,  of  course,  in 
a  rise  in  the  money  value  of  our  exports  far  in 
excess  of  the  growth  in  the  physical  volume  of 
exports.     It  nevertheless  appears  that  when 
the  price  factor  is  eliminated  in  estimating  the 
growth  in  the  volume  of  our  exportations,  the 
quantities  of  goods  we  have  sent  overseas  in 
the  past  five  years  are  so  largely  in  excess  of 
what  was  our  customary  pre-war  normal  as  to 
constitute  a  serious  deduction  from  the  goods 
left  in  the  United  States  available  for  domestic 
consumption.    For  the  fiscal  year  1915,  our  ex- 
ports by  quantities  show  an  increase  over  the 
average    exportations   by   quantities   for   the 


I 


years  1910  to  1914  of  about  25  per  cent;  for 
the  two-year  period  embracing  the  fiscal  years 
1916  and  1917,  an  increase  of  over  20  per  cent; 
for  the  fiscal  year  1918,  an  increase  of  9  per 
cent,  and  for  the  fiscal  year  1919,  an  increase 
of  35  per  cent.  It  is  notable  that  the  year 
which  shows  the  heaviest  increase  of  exports 
was  the  last  fiscal  year  of  which  eight  months 
followed  the  armistice,  and  that  35  per  cent  of 
our  exports  in  this  year  consisted  of  foodstuffs. 

REMEDYING  THE  COST  OF  LIVING 

SITUATION 

Under  this  view  of  the  causes  of  our  present 
difficulties,  it  is  clear  that  there  can  be  no  short 
cut  remedies,  and  therefore  no  early  prospect 
of  a  return  to  the  price  situation  we  had  before 
the  war  in  1914.  Prices  may  be  expected  to 
decline,  but  the  more  than  one  hundred  per 
cent  advance  which  they  have  scored  in  the 
past  five  years  will  not  be  retraced  short  of  at 
least  a  similar  period,  if  not,  more  likely,  a 
period  of  ten  years  or  more.  The  most  con- 
siderable relief  in  sight  may  be  expected  to 
come  with  diminishing  exportation  of  food- 
stuffs and  other  articles  of  general  consump- 
tion to  Europe  with  the  termination  or,  at  any 
rate,  reduction  in  the  volume  of  the  credits 
which  Europe  has  had  at  its  disposal  in  the 
American  market  during  the  past  two  years. 
Food  should  certainly  become  cheaper,  and  so 
far  as  food  is  the  most  important  item  making 
up  the  budget  of  the  working  classes,  there 
should  be  an  appreciable  diminution  in  their 
cost  of  living  and  the  cost  of  living  problem 


) 


therefore  find  some  considerable  solution  in 
this  way. 

The  ultimate  and  complete  solution,  how- 
ever, will  come  only  as  the  volume  of  purchas- 
ing media  created  in  the  last  five  years  is  re- 
duced and  the  volume  of  goods  produced  is 
increased.  This  solution,  however,  will  take 
time,  and  in  the  interim  we  shall  continue  to 
have  a  more  or  less  acute  and  troublesome  cost 
of  living  problem.  Some  method  of  dealing 
with  it  in  a  practical  manner  is  therefore  one 
of  the  first  and  necessary  steps  to  be  taken 
toward  the  revival  of  industry  in  the  United 
States  and  the  improvement  of  the  industrial 
situation  generally.  Until  some  satisfactory 
method  of  dealing  with  the  wage  problem  as  it 
has  been  affected  by  the  rising  cost  of  living  is 
worked  out  there  will  be  unrest,  industrial 
strife  and  retardation  of  the  processes  of  in- 
dustrial recovery  that  will  be  costly  in  their 
effects  to  the  nation,  and  costly  to  the  world. 
The  one  thing  that  the  United  States  cannot 
afford  at  this  time  is  suspension  of  industry 
through  failure  to  establish  a  good  working  re- 
lationship between  employers  and  employed. 
Some  acceptable  method  of  adjusting  wages  to 
changes  in  the  cost  of  living  is  an  obvious  first 
requisite  in  dealing  with  the  cost  of  living 
problem. 

While  wage  earners  as  a  class  have  not  been 
the  only  sufferers  from  the  rising  cost  of  liv- 
ing, their  ranks  undoubtedly  embrace  a  larger 
number  of  sufferers  than  any  other  class  of 
income  receivers.  In  its  most  acute  form, 
therefore,  the  cost  of  living  problem  is  a  labor 


problem  and  a  wage  problem.  The  problem  is 
partly  one  as  to  facts,  and  partly  a  question  of 
remedies.  Have  the  great  mass  of  those  who 
are  dependent  on  wage  income  been  compen- 
sated for  the  rising  cost  of  living  by  commen- 
surate increase  of  wages?  This  is  the  aspect 
of  the  cost  of  living  problem  that  is  exciting 
discussion  and  unrest  in  the  United  States  at 
the  present  time.  This  is  the  real  cost  of  living 
problem.  Besides  this,  there  is  an  imaginary 
cost  of  living  problem  and  a  pretended  cost  of 
living  problem  which  must  be  sharply  distin- 
guished from  the  real  cost  of  living  problem. 

There  are  a  good  many  people  who  imagine 
they  are  suffering  unwarrantably  from  the  ad- 
vance of  prices.  For  the  most  part  they  are 
those  whose  incomes  in  the  forms  of  wages  and 
salaries  have  risen  sufficiently,  and  in  many 
cases  more  than  sufficiently,  to  offset  the  rise 
of  the  prices  of  the  things  that  constituted  their 
customary  consumption  in  pre-war  days.  In- 
crease of  money  income  usually  produces  a 
feeling  of  prosperity  even  when  it  is  a  fictitious 
prosperity.  Many  wage  earners  getting  a  big- 
ger pay  envelope  think  themselves  better  off 
irrespective  of  the  fact  that  the  purchasing 
power  of  the  dollar  has  declined  in  substan- 
tially the  same  ratio  as  their  wages  have  in- 
creased. People  in  this  position  are  frequently 
tempted  to  extravagance.  The  man  who  five 
years  ago  received  a  salary  of  four  or  five 
dollars  may  now  be  making  eight  or  ten  dol- 
lars. He  is  apt  to  imagine  himself  rich  in  con- 
sequence and  probably  is  spending  a  consider- 
able part  of  his  increased  money  earnings  for 


■:^: 


« 


I 


things  that  formerly  constituted  no  part  of  his 
normal  consumption.  The  retail  trade  every- 
where reports  heavy  purchases  of  cheap  jew- 
elry, fancy  clothing,  and  the  like.  It  is  a  mat- 
ter of  common  observation  and  remark  that  no 
line  of  business  has  experienced  a  brisker  de- 
mand for  its  output  than  the  automobile  trade 
^nd  the  trade  in  automobile  accessories.  Spend- 
ing heavily  on  purchases  of  this  kind,  the  mar- 
gin that  is  left  over  for  the  purchase  of  neces- 
saries and  real  conveniences  of  life  is  inade- 
quate at  present  prices  to  maintain  customary 
standards.  Those  who  are  victims  of  their 
extravagance  and  foolishness  then  complain 
that  they  are  suffering  from  the  high  cost  of 
living,  when  the  cause  of  their  difficulties  is  the 
change  in  their  standard  of  living.  It  may  be 
right  that  the  standard  of  living  should  be 
raised,  but  it  does  not  induce  clear  thinking 
but  merely  confuses  the  issue  not  to  note  the 
distinction  between  the  real  and  the  fictitious 
problem.  It  is  the  real  cost  of  living  problem 
that  concerns  the  nation  at  this  time. 

Unfortunately  our  sources  of  statistical  in- 
formation are  not  yet  such  that  comparisons 
can  be  made  on  an  extensive  scale  between  the 
incomes  of  different  groups  (by  income)  of  the 
wages-receiving  class  and  the  prices  of  the 
articles  that  go  to  make  up  the  customary  con- 
sumption or  normal  standard  of  living  of  the 
several  groups.  What  is  needed  for  this  pur- 
pose is: 

1.  A  cost  of  living  index,  which  shall  care- 
fully exhibit  and  measure  changes  in  the 


2. 


7 


cost  of  living  to  labor  classified  by  income 
groups,  and 

A  wage  index,  which  shall   exhibit  and 
measure  changes  in  the  wage  income  of 
these  different  groups  such  as  will  enable 
a  comparison  to  be  made  for  the  purpose 
of  determining  whether  wages  are  keeping 
pace  with  prices. 
The  United  States  Bureau  of  Labor  Statis- 
tics has  undertaken  some  important  work  in 
this  connection  which,  as  it  is  carried  to  com- 
pletion, will  yield  results  which  will  be  of  high- 
est usefulness.    Among  other  things,  the  inves- 
tigation has  been  planned  for  the  purpose: 

(a)  Of  determining  the  cost  of  all  important 
items  of  family  consumption  in  all  the 
more  important  centers  of  industry  in 
the  United  States; 

(b)  Of  enabling  the  Bureau  of  Labor  Statis- 
tics to  compute  a  cost  of  living  index 
number  that  will  show  variations  in  total 
family  expenses  in  the  same  way  as  its 
retail  food  price  index  now  shows  vari- 
ations in  the  cost  of  the  family  food 
budget;  and 

(c)  Of  formulating  eventually  tentative 
standard  budgets  to  be  used  by  wage 
adjustment  boards  in  determining  mini- 
mum and  fair  wage  awards. 

The  statistical  services  of  some  of  our  States 
are  moving  in  the  same  direction.  Until  the 
data  developed  through  these  sources  are  avail- 
able, it  will  be  premature  for  anyone  to  venture 
an  authoritative  pronouncement  upon  the  rela- 
tive trend  of  wages  and  the  cost  of  living  in 


t 

I 


J 


>  :m0- 


recent  months  or  years  for  American  industry 
as  a  whole. 

Such  statistical  data  as  are  available  show 
that  food  constitutes  from  35  to  45  per  cent  of 
the  total  expenditure  of  typical  wage-earning 
families  consisting  of  parents  and  three  chil- 
dren under  fifteen  years  of  age.  The  percent- 
age spent  for  food  is  larger  in  the  lower  in- 
come groups,  but  the  amount  spent  for  food  is 
larger  in  the  higher  income  groups.  Food 
prices  show  an  increase  of  91  per  cent  for  the 
six-year  period  from  May  15,  1913,  to  May  15, 
1919,  the  increase  for  the  single  year  1918  to 
1919  being  27  per  cent,  and  for  the  month  April 
15  to  May  15, 1919,  2  per  cent.  Clothing  makes 
up  from  15  to  20  per  cent  of  the  expenditure 
of  the  average  wage-earning  family,  the  in- 
crease in  cost  of  clothing  computed  from  the 
index  number  of  wholesale  prices  as  compiled 
by  the  Bureau  of  Labor  Statistics  being  about 
150  per  cent,  to  June,  1919.  Eent  makes  up 
from  9  to  15  per  cent  of  the  expenditure  of  the 
average  wage-earning  family,  but  no  satisfac- 
tory data  are  available  as  to  the  average  in- 
crease in  rents.  But  it  is  a  matter  of  conamon 
observation  and  complaint  that  rents  have  ad- 
vanced considerably,  especially  since  the  sign- 
ing of  the  armistice.  Fuel  and  lighting  make 
up  from  3y2  to  7  per  cent  of  working  family 
expenditures  and  these  items  have  advanced  in 
price  over  the  1913  level  some  80  per  cent. 
House  furnishings  make  up  from  4  to  7  per 
cent  of  expenditure,  and  have  advanced  in  price 
since  1913,  131  per  cent. 

It  is  clear,  therefore,  that  there  has  been  a 


n 


very  marked  advance  in  the  prices  of  all 
groups  of  commodities  that  make  up  the  con- 
sumption of  the  average  working  class  family. 
Whether  wages  have  kept  pace  cannot  be  de- 
termined on  a  satisfactory  scale  until  the  in- 
dustrial survey  undertaken  by  the  Bureau  of 
Labor,  and  now  nearing  completion,  is  com- 
pleted and  the  results  published.  The  prelimi- 
nary report  now  in  progress  will  present  the 
basic  facts  concerned,  the  hours  worked  and 
the  earnings  received,  for  a  large  range  of  oc- 
cupations. It  will  supply  a  basis  on  which  in 
time  may  be  erected  a  wage  index  for  all  the 
important  industries  of  the  country  distributed 
throughout  its  length  and  breadth. 

In  the  meantime  the  results  of  the  investiga- 
tion of  the  New  York  State  Industrial  Com- 
mission showing  comparative  index  numbers  of 
average  weekly  earnings  in  New  York  State 
factories  and  of  retail  food  prices  in  the 
United  States  since  June,  1914,  are  worth  not- 
ing as  of  considerable  value : 

For  the  year  1914,  the  index  number  for 
wages  is  98  as  compared  with  105  for  food ;  for 
the  year  1915,  101  as  compared  with  102;  for 
the  year  1916,  114  as  compared  with  115;  for 
the  year  1917,  129  as  compared  with  147;  for 
the  year  1918,  160  as  compared  with  170;  for 
the  first  quarter  of  the  year  1919,  177  as  com- 
pared with  179.  These  figures  indicate  a  rise 
of  16  per  cent  in  wages  for  the  year  1917,  and 
6.25  per  cent  for  the  year  1918,  with  the  gap 
almost  closed  in  the  year  1919.  This  shows  the 
situation  in  the  State  of  New  York.  How  far 
it  is  representative  is  a  question. 


Data  derived  from  other  sources  showing  the 
movement  of  union  wage  rates  in  19  trades  in 
about  12  cities  in  1914,  to  and  including  May 
15,  1918,  yield  some  interesting  results,  espe- 
cially in  the  building  trades.  Bricklayers' 
wages  lagged  21  per  cent,  carpenters'  18  per 
cent,  cement  finishers'  20  per  cent,  granite  cut- 
ters' 18  per  cent,  hod  carriers'  9  per  cent, 
painters'  14  per  cent  and  plasterers'  25  per 
cent.  The  wages  of  blacksmiths  gained  5  per 
cent,  iron-molders  5  per  cent,  and  machine- 
makers  10  per  cent,  while  boiler-makers  lost 
5  per  cent.  Plumbers'  and  gas-fitters'  wages 
lagged  20  per  cent,  structural  iron-workers'  14 
per  cent,  stone-cutters'  18  per  cent,  composi- 
tors' 25  per  cent  and  electrotypers '  27  per 
cent.  Taking  these  figures  as  a  whole,  they 
show  a  considerable  lag  of  wages  compared 
with  the  advance  in  the  cost  of  living. 

In  certain  important  industries  which  were 
stimulated  by  war  conditions  a  different  situa- 
tion is  presented.  Eeal  wages  in  the  boot  and 
shoe  industry  gained  23.5  per  cent,  in  the  cot- 
ton finishing  industry  6  per  cent,  in  the  cotton 
manufacturing  industry  13  per  cent,  in  the 
manufacture  of  hosiery  and  underwear  11  per 
cent,  in  the  silk  industry  5  per  cent,  in  woolen 
manufacturing  9  per  cent,  and  in  the  iron  and 
steel  industry  45  per  cent,  comparing  the  clos- 
ing weeks  of  December,  1914,  with  the  end  of 
September,  1918. 

So  far  as  these  data  disclose  the  situation, 
it  must  be  said  that  there  has  been  on  the 
whole  a  lack  of  close  correspondence  of  changes 
of  wages  with  changes  in  the  cost  of  living.    In 


M 


many  cases  wages  have  lagged;  in  other  cases 
they  have  overtaken  and  outrun  the  rise  in  the 
cost  of  living.  There  has  been  no  general  pol- 
icy, either  public  or  private,  governing  the 
action  of  industry  in  the  matter  of  wage  ad- 
justment to  changed  living  conditions.  All 
sorts  of  influences  have  been  at  work  in  deter- 
mining the  outcome;  the  maintenance  of  the 
standard  of  living  has  not  been  the  controlling 
consideration.  The  state  of  the  labor  market 
in  different  industries  has,  at  times,  resulted 
in  increase  of  wages  more  than  the  increase  in 
the  cost  of  living,  and  at  other  times  wages 
have  lagged.  The  extent  to  which  different 
trades  were  imionized  also  had  much  to  do 
with  the  matter. 

These  facts  and  indications,  fragmentary  as 
they  are,  reveal  a  situation  which  from  every 
reasonable  point  of  view  must  be  regarded  as 
unsatisfactory.    Much  as  was  achieved  in  cer- 
tain industries   during  the   war  through  the 
action  of  public  or  private  agency,  the  mainte- 
nance of  the  standard  of  living  does  not  oc- 
cupy the  decisive  place  it  should  in  the  deter- 
mination of  wages.    Chance  and  circumstance 
play  too  large  a  role,  and  principle  too  little. 
Wages  must  be  regarded  as  the  first  charge  of 
industry,  and  the  maintenance  of  at  least  those 
living  standards  which  were  customary  before 
the  war  must  be  made  secure.    The  first  duty 
of  the  nation  is  to  preserve  the  health  and 
strength  of  its  workers.    The  standard  of  liv- 
ing is,  therefore,  a  matter  of  public  and  na- 
tional concern  as  well  as  of  individual  concern. 
The  nation  cannot  afford,  industry  cannot  af- 


f 


'is 


ford,  to  run  the  risk  of  impairing  its  working 
forces  through  lack  of  some  effective  method 
of  adjusting  wages  to  the  cost  of  living.    This 
is  in  an  immediate  sense  the  most  pressing 
aspect  of  the  cost  of  living  problem  with  which 
we  are  confronted.    Close  study  should,  there- 
fore, be  given  by  different  industries  in  every 
section  of  the  country  to  methods  of  handling 
the  problem  in  an  effective  and  equitable  way. 
Beginnings  have  been  made  in  some  business 
and   industrial   enterprises,   but  the   problem 
should  be  taken  hold  of  on  a  systematic  and 
national  scale  in  order  that  the  needed  results 
shall  be  achieved.    Some  mechanism  by  which 
wages  may  promptly  be  adjusted  to  changes  in 
the  cost  of  living  must  be  accepted  as  an  es- 
sential  part    of   the   American   wage    system. 
Public  sentiment  in  the  United  States  is  rap- 
idly focusing  itself  upon  this  principle,  and  the 
employer  who  attempts  to  escape  it,  or  resist 
it,  is  likely  to  find  himself  in  contempt  of  public 
opinion.    Such  action  is  particularly  urgent  in 
view  of  the  extremely  uncertain  and  disturbed 
course  which  prices  and  the  cost  of  living  seem 
likely  to  follow  for  a  good  many  years  to  come, 
or  until  the  affairs  of  the  world  are  once  more 
in  a  state  of  settled  equilibrium.     It  will  not 
do  to  leave  the  adjustment  of  wages  to  changes 
in  the  cost  of  living,  either  to  the  slow  and 
uncertain  action  of  the  forces  of  competition, 
or  to  the  costly  and  disruptive  action  of  indus- 
trial warfare.    So  far  as  the  strike  is  a  method 
of  securing  an  adjustment  of  wages  to  rising 
prices,  it  should  become  an  obsolete  feature  of 
the  American  industrial  system. 


<f 


COLUMBIA  UNIVERSITY  LIBRARIES 


■                               — — —, — - 

1 

I                                          DATE  BORROWED 

r 

DATE  DUE            1 

DATE  BORROWED 

DATE  DUE 

1 

I^B 

1 

1 

1 

j 

•» 

1 

. 

* 

.^^ 11.      w 

-— 1 :^ 

> 

■ 

1 

1 

K 

.  1  ■ , 

III         — ■ — — 

I!' 

- 1 

« 

t 

i  ' " 



i 
\ 

ft 

'1 

1         ■ . 

j 

"-"— 

1      ,i 
i 

^ 

1 

1 

1                          C28(747>  MlOO 

1 

%     ■ 

/ 

\\ 


Miller 


V\G\ 


?he  OQBf  nf  living  problem,.. 


i 


(I 


/viti 


^  I! 


''«S«?J 


^^,  .JE'i, 


V 


1^^ 


rw^^i^nm** 


COLUMBIA  UNIVERSITY  LIBRARIES 


0041413571 


MAY  1 1  1926 


^JV''vVT9»»- 


^'-'liiiii^H 

]-/,';. ','^,||^^^^S 

'  ■  ^ ' ' « '  i  ^^^^H 

, 

;;rtj:8 


Biii  *  111 

